Activity Based Costing for Lynas Corporation

Activity based costing 1
ACTIVITY BASED COSTING
By (Student’s Name)
Professor’s Name
College
Course
Date

Activity based costing 2
ACTIVITY BASED COSTING
Table of Contents
ACTIVITY BASED COSTING...........................................................................................................................1
Executive summary.....................................................................................................................................3
Introduction.................................................................................................................................................3
Explanation of Activity-based costing and its features................................................................................4
How Activity based costing aligns with strategies and goals of the Lynas Corporation...............................7
Mission and objective of the Lynas Corporation.....................................................................................7
Corporate strategies of the Lynas Corporation........................................................................................7
An explanation of how Activity-based costing enables Lynas Corporation to achieve its strategies.......8
Recommendations regarding the implementation of the Activity-based costing model for Lynas
Corporation.................................................................................................................................................9
Alternative management accounting tool appropriate for Lynas Corporation..........................................10
Conclusion.................................................................................................................................................10
References.................................................................................................................................................12

Activity based costing 3
Executive summary
The costs perform the essential role in the development of any corporations’
particularly in the sector of industrial. A suitable management accounting system of the
company should be consistent with the commitment of the corporate. The management should
also be able to perform its underlying activities by lead time, quality and cost. The paper look at
how the Lynas Corporation should implement the use of the Activity-based costing system to
enable more identifiable and accurate cost information appropriately. The primary focus of this
paper is to discuss in detail how the application of the Activity-based costing can help the Lynas
Corporation to improve its performance. It is also clear that the use of the ABC does not allow
for the improvements of processes or reduces the expenses of the organization. The
implementation of the ABC system into the organization only lays the foundation for the
advances of a process as well as refining information on cost. The paper also presents
appropriate recommendation that the management at Lynas Corporation should apply to
ensure effective implementation process. There is also an explanation of the best alternative
model that is capable of increasing the performance of the organization.
Introduction
Lynas Corporation is a mining Company that has gone through various changes for the
past few years. The business uses a significant amount of equity funding and debt in
establishing both the processing plant and mine, but the return on the investments was still
low. The production department of the organization was also unstable. This is because there
are high costs that are associated with particular activities that the organization performs. The

Activity based costing 4
current market price of its products also kept on fluctuating in the market. The organization
experiences all these changes because the organization’s ways of operation and corporate
structure were not in line with the modern market settings. Also, production and some of the
activities that the organization performs were hindered by legal challenges and operating
challenges. Therefore, to ensure that all the problems that face the organization are solved, the
management has to developed appropriate model that will help in resetting the cost base of
the Company as well as improving their functional performance while trading in the market.
The management should also ensure that the traditional strategic framework that is in place
support the financial house of the organization. Most of the issues that affect the Lynas
Corporation relate to decisions regarding allocation of costs to activities. I will advise the
management to implement and use the Activity-based costing model. This model will enable
the organization cut the operations cost and increase the efficiency of the business. All these
processes will ensure that there is the effective decision-making process in the organization. To
help explain how Activity-based costing will enhance the performance of the Lynas Corporation;
the paper is separated into different sections with each part narrates issues that deal with the
implementation process. There is an indication of accounting tool that can be used together
with the ABC to facilitate the performance of the organization.
Explanation of Activity-based costing and its features
ABC is the method of accounting that allocates costs to commodities, and the allocation
process depends on the resources that are used in the process of production. Kaplan and
Cooper introduced the concept of ABC system in the year of 1987. Activity-based costing is an